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Analyzing Capital Structure across Industries: Evidence from Croatia

Authors
  • Karanović, Bisera
  • Nikolić, Gordana
  • Karanović, Goran1
  • 1 University of Rijeka, Croatia , (Croatia)
Type
Published Article
Journal
Zagreb International Review of Economics and Business
Publisher
Sciendo
Publication Date
Dec 01, 2019
Volume
22
Issue
s2
Pages
1–10
Identifiers
DOI: 10.2478/zireb-2019-0024
Source
De Gruyter
Keywords
License
Green

Abstract

Capital structure refers to the delicate balance between equity and debt that a company uses to finance its assets. It is typically expressed as a debt-to-equity or debt-to-capital ratio, with the components usually located on the right side of the company’s balance sheet. Capital structure can exert great influence on the company’s risk profile and ability to leverage its operations. For this reason, the authors conducted an investigation of the capital structure of 16 joint stock companies listed on the Zagreb Stock Exchange comprising CROBEX, the equity index of Croatia for a three-year period starting in 2015 and ending in 2017. The study demonstrates that many CROBEX-listed companies are very risk averse and choose to remain debt-free. Some are, however, starting to discover the potential offered by financial leverage and have slowly started adjusting their capital structure. In conclusion, capital structure is slowly becoming an issue worthy of discussion on the corporate agendas in Croatia.

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